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Inflation Showed No Monthly Increase in May, While Annual Rate Slows
June 12, 2024
Consumers got a break last month, as one popular inflation gauge showed no increase in May and some components showed outright deflation, according to the Labor Department’s Bureau of Labor Statistics.
The consumer price index (CPI), a broad inflation gauge that tracks the costs for a common basket of goods and services across the economy, remained flat for the month, slowing from April’s 0.3% increase. That marks the first time that the CPI has posted no monthly increase since July 2022 and the second consecutive month of declining inflation, after the Fed’s efforts to slow price gains hit something of a plateau at the start of the year.
On an annual basis, inflation was up 3.3% from a year earlier. That is still much higher than the Federal Reserve’s 2% target, but lower than the 3.4% that economists polled by Dow Jones had expected. The “core” inflation rate, which excludes volatile components like food and energy, increased 0.2% for the month, the slowest increase since October, and 3.4% from a year earlier, both below Wall Street expectations of 0.3% and 3.5%, respectively.
While headline figures for core and all-item inflation were down, shelter inflation increased 0.4% on the month and was up 5.4% annually. Housing-related costs, which account for a sizable portion of the index’s weighting, have been a major point of concern in the Fed’s battle against inflation.
The month’s inflationary gains were kept in check by falling gasoline prices, which fell 3.6% from April. Grocery store prices were up 0.1% for the month, but consumers saw outright deflation in several categories, as prices for things like apparel, new automobiles, and airfare fell. Motor vehicle insurance, another persistent concern for the Fed, saw a monthly decline of 0.1%, but still remains up more than 20% on an annual basis.
The report was released just hours before the Federal Open Market Committee meeting, where Fed policymakers, as was widely expected, kept its key overnight interest rate target unchanged at a range between 5.25% and 5.50%. the highest level in 22 years. At the meeting, fed officials projected that we would likely see just one interest rate cut this year.
Still, the CPI report raised hopes that we may see more than that. Signals from the market show a 73% probability of a cut at the September meeting, up from 53% the day before the CPI release, according to the CME Group’s FedWatch tracker. The odds of a second rate cut in December also jumped, to 72%, after being at roughly 50-50 the day prior.
